Ocean Wilsons Defends Proposed Hansa Merger Amid Arnhold’s Criticism

Ocean Wilsons (LON:OCN) said in a release that it is actively addressing concerns raised by shareholder Arnhold regarding the proposed combination with Hansa Investment Company Limited.

The company's Independent Committee issued a response on Friday to what it deems “misleading and inaccurate statements” made by Arnhold, emphasizing the potential benefits of the merger.

The core of Ocean Wilsons' defense rests on the assertion that the merger will create a larger, more diversified investment company with net assets exceeding £900 million.

This scale, they argue, will allow the combined entity to capitalize on investment opportunities across both public and private markets more effectively.

Moreover, the company anticipates cost efficiencies through spreading fixed costs over a larger asset base and implementing a reduced, tiered management fee structure.

Ocean Wilsons directly refuted Arnhold's valuation concerns. The company clarifies that the exchange ratio of 1.4925 Hansa Share Units per Ocean Wilsons share ensures shareholders retain the same economic interest (£20.16) in the combined group's net asset value (NAV).

The company argues that comparing Ocean Wilsons' formula asset value (FAV) per share to Hansa's share price is a flawed comparison. The exchange ratio is said to be based on the respective contributions to the combined group's net assets, not on share prices, which fluctuate based on market sentiment.

Addressing concerns over cash treatment, Ocean Wilsons communicated that the combined group intends to invest Ocean Wilsons' cash balance in accordance with its investment strategy. The Independent Committee believes valuing the cash at its actual value is appropriate.

Arnhold's alternative approach, they contend, would unfairly allocate a disproportionate share of the combined group to Ocean Wilsons shareholders relative to their asset contribution.

Ocean Wilsons also defended the valuation of Hansa's existing stake in Ocean Wilsons itself. Valuing Hansa's shareholding at market value, according to the company, would create an inconsistent valuation of the same underlying assets within the transaction.

The Independent Committee confirmed that directors with interests in both Ocean Wilsons and Hansa, as well as the investment manager Hanseatic Asset Management LBG (HAML) and advisor Hansa Capital Partners (HCP), have been appropriately managed

A key advantage of the merger, according to the Independent Committee, is the reduction in management fees. The current 1% fee on Ocean Wilsons' investment portfolio will decrease to a blended rate of 0.8% up to £500 million and 0.7% thereafter, without performance fees.

The company believes that this reduction will directly benefit shareholders due to the increased scale of the combined entity.

Finally, Ocean Wilsons addressed the alternatives to the proposed combination. The Independent Committee, after considering various options, concluded that the Hansa merger offers the most compelling opportunity for long-term value creation.

They believe that remaining a standalone entity presents risks, including a potential transfer to the “closed-ended investment funds” listing category, which could lead to share suspension and require shareholder approval. The company also believes standalone status would limit capital allocation options and lack the scale benefits of the merger.